Maximum LTV / CLTV and FICO Requirements Purchase VA IRRRL / Rate & Term Cash-out Refinance Maximum LTV 1 / CLTV 1 Min FICO 2 Maximum LTV 1 / CLTV 1 Min FICO 2 Maximum LTV 1 / CLTV 1 Min FICO 2 100% 640 100% 640 90% 640 1 Exclusive of Financed VA Guaranty Funding Fees (except for IRRRL) 2 See the Underwriting Section for other FICO requirements for manual underwrites Maximum Guaranty The Maximum Guaranty, when the Veteran has full entitlement, is shown in the table below: Loan Amount Up to $45,000 Maximum Potential Guaranty 50% of the loan amount $45,001 to $56,250 $22,500 $56,251 to $144,000 40% of the loan amount, with a maximum of $36,000 $144,001 to $417,000 25% of the loan amount Greater than $417,000 The lesser of 25% of the VA county loan limit; or 25% of the loan amount The percentage and amount of guaranty is based on the loan amount including the funding fee portion when the fee is paid from loan proceeds. Ability To Repay and Qualified Mortgage Rule Age of Docs For loans subject to the ATR/QM rule, CMW will only purchase loans that comply with the ATR/QM requirements. - Note: Investment properties which are for business purposes (borrower does not intend to occupy for greater than 14 days in the year) are exempt from ATR/QM; however, such loans must meet agency eligibility requirements and are subject to the applicable points and fees threshold. Brokers are responsible for providing evidence of compliance with the ATR/QM rules. Clear itemization of fees and application of all credits that indicate paid by/to will be required on all loans. See Seller Guide section "Ability to Repay and Qualified Mortgage Rule" under "Delivery Procedures" for more details. 120 days for existing construction from the date the note is signed. 180 days for new construction. All appraisals must be ordered through VA's TAS (The Appraisal System), which will assign the order to a VA approved Appraiser -include an interior and exterior inspection of the subject property A notice of value for property appraised as existing or new construction is valid for six months. Rapidly fluctuating real estate market conditions may temporarily dictate the use of a shorter validity period. No new Appraisal can be requested on a property which already has a valid VA value determination (No duplicate appraisals) Appraisals Unpermitted Property Additions CMW will purchase loans secured by properties with unpermitted structural additions under the following conditions: The subject addition complies with all investor guidelines; The quality of the work is described in the appraisal and deemed acceptable ( workmanlike quality ) by the appraiser; The addition does not result in a change in the number of units comprising the subject property (e.g. a 1 unit converted into a 2 unit). If the appraiser gives the unpermitted addition value, the appraiser must be able to demonstrate market acceptance by the use of comparable sales with similar additions and state the following in the appraisal: o Non-Permitted additions are typical for the market area and a typical buyer would consider the "unpermitted" additional square footage to be part of the overall square footage of the property. o The appraiser has no reason to believe the addition would not pass inspection for a permit. 1
ARM Initial Interest Rate Adjustment Dates Borrowers Buy downs Please see ARM Initial Interest Rate Adjustment document on www.commercemtgwholesale.com, click on the Quick Reference Guide Tab, and choose Government ARM Initial Interest Rate Adjustment Dates. Must be a veteran witheligibility documented with a Certificate of Eligibility (COE), which will also indicates the Veteran's Entitlement. Resident Alien permitted as long as primary borrower is a veteran. Joint loans are not allowed. A veteran borrower plus spouse co-borrower is not considered a joint loan. No Temp Buy downs Condominiums Credit Derogatory Credit Disaster Policy Documentation Type Condos must be approved by VA. The approval condo list is available on TAS. IRRRLs do not require a condo approval. All borrowers must return at least 1 credit score via three-in-file merged credit report. Non-traditional credit is not allowed. If the subject property is located in a community property state and the borrower has a non-purchasing spouse, a credit report for the non-purchasing spouse must also be ordered Cannot be delinquent on any Federal Debt unless the delinquent account has been brought current or a satisfactory arrangement has been made - Check CAIVRS The credit of a spouse who will not be contractually obligated on the loan does not need to be considered, except: -- if the applicant is relying on alimony, child support, or maintenance payments from the spouse (or former spouse), or -- in community property states, whether or not the spouse will be personally liable on the note. -- See Lender's Handbook Ch. 4, 7-c for complete details. 2 years elapsed since the discharge of Ch. 7, Ch. 13 Bankruptcy or Deed in Lieu/Short Sales when the borrower was not delinquent at transfer 3 years elapsed since completion of Foreclosure, Deed in Lieu/Short Sale when the borrower was delinquent at time of transfer All judgments must be paid in full or subject to a repayment plan with a history of timely payments. CMW may require a post-disaster inspection when the appraisal occurred before the incident end date of the disaster. See CMW disaster policy located in the Seller's Guide for full details. Determined by AUS Tax transcripts are required for each borrower whose income is utilized as a source of repayment. Transcripts must be provided for the number of years of income used to qualify the borrower. Tax transcripts are required to support the income used to qualify the borrower. If W2 income is used to qualify, the lender may obtain W2 transcripts as long as tax returns are not included in the loan file. Generally, when the documentation used to verify income is from the same calendar period as the tax transcript, the information must match exactly. However, if the income doc is from the current calendar year and the transcript is from a prior year, there can be acceptable variances. If variance exceeds 20%, document the rationale for using current income. If tax transcripts are not available (due to a recent filing) a copy of the IRS notice showing No record of return filed is required along with documented acknowledgement receipt (such as IRS officially stamped tax returns or evidence that the return was electronically received) from the IRS and the previous one year s tax transcripts. A 4506-T, signed at application and closing, is required for all transactions (except for IRRRLs). DTI Any allotments reflected on the LES or paystubs must be investigated, to determine if the allotment has an affiliated debt. In community property states, the spouse s debts and obligations must be considered even if the veteran wishes to obtain the loan in his or her name only. 2
Active Military income must be documented with a Leave and Earnings Statement (LES) Provide an acceptable VVOE for all borrowers that are a source of repayment. Employment/Income Eligible Mortgage Products Entitlement Mortgage Credit Certificates (MCCs) issued by state and local governments may qualify a borrower for a Federal tax credit. The Federal tax credit is based on a certain percentage of the borrower s mortgage interest payment. Lenders must provide a copy of the MCC to VA with the loan package which indicates: the percentage to be used to calculate the tax credit, and the amount of the certified indebtedness. The certified indebtedness can be comprised of a loan incurred by the veteran to acquire a principal residence or a qualified home improvement or rehabilitation loan. If the percentage on the MCC is more than 20 percent, there is an annual limit on the tax credit equal to the lesser of $2,000 or the borrower s maximum tax liability. Calculate the tax credit by applying the specified percentage to the interest paid on the certified indebtedness. Then, apply the annual limit. Example: The MCC shows a 30-percent rate and $100,000 certified indebtedness. The borrower will pay approximately $8,000 in annual mortgage interest. Borrower s estimated total Federal income tax liability is $9,000. Calculate the tax credit as follows: 30 percent of $8,000 = $2,400 Apply the annual $2,000 limit The tax credit will be $2,000 Use $167 (one-twelfth of $2,000) in the monthly analysis. Note: If the mortgage on which the borrower pays interest is greater than the amount of certified indebtedness, limit the interest used in the tax credit calculation to that portion attributable to the certified indebtedness. Fixed Rate: 10, 15, 20, 25 and 30 year terms. High Balance is only allowed on 25 and 30 year term. CMT ARM: 5/1 (1/1/5 caps) and 7/1 (2/2/6 caps). High Balance allowed on ARMs. Entitlement is the amount of VA Guaranty available to a Veteran for use on a loan. The amount of entitlement will be displayed near the center of the COE. VA loans must conform to GNMA secondary market guidelines which include the minimum 25% coverage requirement. Coverage is a combination of VA provided entitlement plus cash down payment/equity. Compromised Entitlement is acceptable as long as the event that caused the compromise occurred more than three years prior to the date of the application, The COE will never reflect any additional specific entitlement amount over $36,000 for loans greater than $144,000, but will reflect "Available*" Escrow Holdbacks Escrow holdbacks are allowed in accordance with VA guidelines, including but not limited to: A post funding stipulation for a copy of a 1004D confirming completion will be placed on loans where the appraisal is "subject to" improvements. A post funding stipulation for a final title policy endorsement that ensures the priority of the first lien will be required on any loan where the appraisal is "subject to" improvements. A copy of the escrow agreement (VA FORM 26-1849 on VA loans) will be required that states how the escrow account will be managed and how the funds will be disbursed. Escrow / Impounds Exclusionary Lists An impound account for collection of taxes and insurance (or additional escrow items) is required. All borrowers must be screened by CAIVRS to determine there have been no late payments on Federal debt obligations Funding Fee The Funding Fee may be financed in the loan. The following Veterans are exempt from paying the funding fee: -Veterans receiving VA compensation for service connected disabilities -Veterans who would be entitled to receive compensation for service connected disabilities if they did not receive retirement pay -Veterans who are rated by VA as eligible to receive compensation as a result of pre-discharge disability exam and rating -Veterans entitled to receive compensation, but who are not presently in receipt of the compensation because they are on active duty -Surviving spouses of veterans who died in service or from service-connected disabilities, whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan. 3
High Cost / High Priced IRRRL CMW will not purchase High Cost Loans Higher Priced Mortgage Loans (HPML) transactions are eligible for purchase. HPML guidelines require: - Establishment of an escrow account for taxes and insurance premiums on any transaction secured by a principal residence. - Must meet all applicable state and/or federal compliance requirements. - A prohibition on ARM loans with an initial fixed rate period of less than seven years (7/1 ARMs are eligible). Maximum 100% LTV/CLTV based upon Total Loan Amount (Base loan amount plus financed VA Funding Fee). Owner-Occupied Only At minimum, Conventional 2055E/1075 appraisal required. 2-4 unit transactions require a full appraisal. Any repairs that impact safety, livability or habitability must be completed prior to CMW delivery. 0X30x12 for all mortgages The borrower must be the same except: --for the removal of a non-veteran spouse due to death or divorce (provide supporting documentation indicating event occurred at least 12 months before the time of application). There will Be no exceptions granted to this requirement. --only spouses can be added -Borrower should receive no cash back at closing. However, cash back can never exceed $500. - -DTI is not calculated -Provide a V-VOE or third party verification for income source. -The new interest rate must be lower than the old interest rate unless the new loan is refinancing an ARM. -The principal and interest payment on the IRRRL MUST be less than the loan being refinanced unless one of the following exceptions applies: -The IRRRL is refinancing an ARM -Term of the IRRRL is shorter than the term of the loan being refinanced if the payment (PITI) increases by 20% or more, the lender must: determine that the veteran qualifies for the new payment from an underwriting standpoint; such as determine whether the borrower can support the proposed shelter expense and other recurring monthly obligations in light of income established as stable and reliable, include a certification that the veteran qualifies for the new monthly payment which exceeds the previous payment by 20% or more, and limit the DTI to 50% or less. - Source of funds to close are not required on an IRRRL - Seasoning: Must evidence 6 month mortgage history 4
Loan Limits VA Loan Limits by geographic region can be located at: http://www.benefits.va.gov/homeloans/loan_limits.asp Maximum base loan amount cannot exceed the greater of the VA County Loan Limit or $1,000,000. If the loan limit for a county decreased in 2014, CMW will allow a loan using the previous higher limit if there is proof of a pre-approval based on a sales contract and URLA executed on or before December 31, 2013. Loan Purpose Purchase VA IRRRL -Disbursed cash out to the Borrower cannot exceed $500 Rate & Term--payoff of an existing non-va loan (and purchase money second, if applicable) -Disbursed cash out to the Borrower cannot exceed $500 Cash Out - Cash out funds, including non-purchase money liens are limited to $100k. There must be an existing lien against the property. No Construction Loans, used to finance the construction of the subject No Energy Efficient Mortgage Loans No Graduated Payment Mortgages Occupancy Pre Payment Penalty Property; Eligible Types Property; Ineligible Types Owner Occupied only Second Homes not allowed Investment Properties not allowed Pre-payment Penalties are not permitted Single Family Attached/Detached 2 4 Units PUDs Condominiums Leaseholds with proof of prior VA approval In addition to the ineligible property types identified in VA Lender's Handbook, the following property types are ineligible: Manufactured homes. Mobile Homes Cooperatives Condotels Hotel Condominiums Timeshares Geodesic Domes Working Farms and Ranches Unimproved Land and property currently in litigation Commercial Enterprises (e.g. Bed and Breakfast, Boarding House, Hotel) 5
Property; Maximum Number of Qualifying Recently listed properties Reserves Residual Income Sales Concessions Seasoning No limit Fixed rate qualify at the Note rate. 5/1 and 7/1 ARMs qualify at the Note rate. VA IRRRL / Rate & Term - the listing must have been expired or been withdrawn on or before the application date. Note: if the property was listed in the prior 30 days to the application date, the Early EPO provision will be extended to one year. Cash-Out Transaction - the listing must have been expired or been withdrawn 180 days prior to the application date. SFR, Reserves are not required Verify assets to close If using rental income from the subject 2-4 unit property, 6 months reserves required for multi-unit properties. Residual Income is the borrower's net effective income minus monthly shelter expenses Residual Income must be in accordance with regional table and is a required calculation in addition to DTI Net Effective Income is taken from Line 41 of VA Form 26-6393 Monthly Shelter Expense is taken from Line 21 of VA Form 26-6393 Sales concessions cannot exceed 4% of the established reasonable value of the property (NOV). Does not include normal discount points and payment of the buyer's closing costs. Please refer to the CMW Seasoned Loan Policy located in the CMW Seller Guide for requirements and loan-level price adjustments. State Restrictions Title Insurance Underwriting Method Texas 50 (a)(6) loans are not allowed. 2-4 Unit properties in New Jersey, effective with commitments issued on or after 7/1/13. Required All Non-IRRRL loans can be submitted and approved through DU or LP. See IRRRL section for requirements on IRRRL transactions. Manual underwriting on non IRRRL transactions are permitted under the following conditions: - 660 FICO on purchase & rate/term transactions; 700 for cash out transactions - 0 x 30 in the most recent 12 months for all prior mortgages - Maximum DTI of 45% - loan must comply with all VA requirements for manual underwriting - Include a copy of the AUS Refer/Eligible in the loan file For guidance not addressed in this Product Profile, Refer to the VA Selling Guide posted in AllRegs or direct at: http://www.benefits.va.gov/warms/pam26_7.asp 6